Subrecipient vs Consultant/Vendor
The difference between a Subaward, a Consulting/Professional Services Agreement, and a Contractor/Fee for Service Purchase Order
A research project may include relationships with contractors, consultants, and subrecipients. The pass-through entity holds the responsibility for deciding whether any given arrangement constitutes a subaward (carrying out an intellectually significant portion of the Federal award, creating a financial assistance agreement) or a contractor agreement (obtaining goods and services, creating a procurement relationship).
Determining the appropriate relationship at proposal stage is critical to ensure appropriate accounting for costs and compliance requirements. Misclassification may result in delays in subaward processing, inaccurate calculation of costs (e.g., failure to include or exclude F&A costs), and time to request approval for project changes.
Use of judgment in making determination. In determining whether an agreement between a pass-through entity and another non-federal entity casts the latter as a subrecipient or a contractor, the substance of the relationship is more important than the form of the agreement. Not all of the characteristics listed may be present in all cases, and the pass-through entity must use judgment in classifying each agreement as a subaward or a procurement contract.
| Subrecipient | Vendor or Contractor | External Consultant |
|---|---|---|
| An entity that has agreed to work in collaboration with the UNM PI to perform a substantive portion of the programmatic effort on an award. | An individual, business, or other entity, which supplies products or services to the University. | An individual or business whose expertise is required to perform the project. Services are temporary and special or highly technical. |
| Uses sponsor funds to carry out a program rather than provide a good or a service | Fee for goods or services | A vendor-type relationship where an individual or company is retained to provide professional advice or services on a project for a fee. |
| Intellectually significant portion of programmatic effort | Provides similar goods or services to many different purchasers | Service provided within normal business operation |
| Responsible for programmatic decision making | No programmatic decision making and is not responsible for research results | No programmatic decision making, but uses knowledge and expertise in field |
| Work performed by the subrecipient's personnel, using their personnel at their facilities | Normally operates in a competitive environment | Paid for their time at a daily or hourly fixed rate. Costs for an independent contractor should include all associated costs, including New Mexico gross receipts tax. |
| Responsible for same regulatory and compliance requirements as prime recipient | Is not subject to sponsor compliance regulations | No stake in outcome of project and is not responsible for designing, developing or reporting the research |
| Provides goods or services that are ancillary to the operation of the research project | Non-UNM entities or person(s) licensed to do business in the State of New Mexico. (UNM employees CANNOT be paid as consultants on UNM projects.) |
Once the nature of the relationship between the two parties has been determined based on the Subrecipient vs. Consultant/Vendor guidance above, please be sure to review the table below to obtain guidance on additional factors to be considered when entering into an agreement.
| Subrecipient | Vendor or Contractor | External Consultant | |
|---|---|---|---|
| Payment Mechanism | Subcontract or Subaward | Purchase Order (P.O.) | Purchase Order (P.O.) |
| Technology Transfer | Potential for patentable or copyrightable technology to be related through the project; Entity has the right to protect technology | No potential for patentable or copyrightable technology to be created | No potential for patentable or copyrightable technology to be created |
| Publications | Publication of results expected; investigator to author or co-author | N/A | N/A |
| F&A (Indirect Costs) | F&A costs apply only to the first $25,000 of the subaward regardless of the time it takes to reach the $25,000 figure | F&A costs apply to the entire amount and these fees are categorized as 'other direct costs' within UNM's internal budget. The account code to use on the UNM internal proposal budget template and on the ABS for Consultants is (63V0). The account code for Professional Services - Other is (69Z0) | F&A costs apply to the entire amount and these fees are categorized as 'other direct costs' within UNM's internal budget. The account code on the ABS for Consultants is (63V0). The account code for Professional Services - Other is (69Z0) |
| Documents Required at Proposal Stage | Requires a separate budget and budget justification to be included in the UNM Proposal application, copy of F&A rate agreement, statement of work, & signed letter of commitment | N/A | *Request a signed Letter of Commitment from the consultant and provide that in the Streamlyne proposal record |
| Documents Required Post Award | Subaward Request Form |
Per Uniform Guidance 2 CFR 200.331
Subrecipients. A subaward is for the purpose of carrying out a portion of a Federal award and creates a Federal assistance relationship with the subrecipient. See §200.92 Subaward Characteristics which support the classification of the non-federal entity as a subrecipient include when the non-federal entity:
(1) Determines who is eligible to receive what Federal assistance;
(2) Has its performance measured in relation to whether objectives of a Federal program were met;
(3) Has responsibility for programmatic decision making;
(4) Is responsible for adherence to applicable Federal program requirements specified in the Federal award; and
(5) In accordance with its agreement, uses the Federal funds to carry out a program for a public purpose specified in authorizing statute, as opposed to providing goods or services for the benefit of the pass-through entity.
Contractors (Consultant/Vendor). A contract is for the purpose of obtaining goods and services for the non-federal entity's own use and creates a procurement relationship with the contractor. See §200.22 Contract Characteristics indicative of a procurement relationship between the non-federal entity and a contractor are when the contractor:
(1) Provides the goods and services within normal business operations;
(2) Provides similar goods or services to many different purchasers;
(3) Normally operates in a competitive environment;
(4) Provides goods or services that are ancillary to the operation of the Federal program; and
(5) Is not subject to compliance requirements of the Federal program as a result of the agreement, though similar requirements may apply for other reasons.
